10 Advantages of Cash (Say No to ATM and Credit Cards)

The Treasury may be printing fewer dollars, but I'm going all cash.

The dollar bill needs you.

A growing number of merchants won't accept cash anymore. That includes a lot of airlines, which insist you pay by credit card if you want to buy a drink or a sandwich on board. And now comes news that the U.S. Treasury is printing fewer dollars, as we move towards an all-plastic economy.

Great news for the banks. Great news for the card companies. Great news for the marketing establishment, which can now pore through our transactions and our personal lives in greater and greater detail.

Me? Call me a contrarian, or just call me ornery, but I view this with gloom. This not a step forward. It's a step backwards. Personally, I've been moving the other way. I've cut down on my use of credit cards and debit cards. The latest news is the final push I needed to get them out of my life completely. I'm going all cash

Here are 10 reasons why:

1. I'll spend less. A variety of scientific studies, such as this one at the Massachusetts Institute of Technology, have found that people are simply willing to spend more when they use credit cards than they do when they use cash. It's common sense. No wonder our national obsession with shopping really took off when credit cards came on the scene. And I've found it personally. Last fall and winter, when I went for an extended period without carrying any plastic at all, my day-to-day spending rate absolutely collapsed.

2. The card bonuses aren't worth it. A lot of people use their credit cards for the frequent flyer miles or other bonuses. But many of these deals are getting less valuable. Airlines are cutting back on flyer programs. And how good were these programs anyway? Schwark Satyavolu, co-founder of BillShrink, says that if you are really smart, dedicated and targeted about getting and using your bonuses, you can sometimes get very good deals. But overall, he says, deals are getting less valuable, and are increasingly focused on cards with annual fees. Most of us are doing very well if we manage to get back 2% on our cards. Compared to the extra amount you spend, that's chicken feed.

3. Cash makes budgeting easy. Personal financial planners encourage clients to draw up budgets. It's great advice, in theory anyway. But I have a confession: I'm just not that organized. Nor, I suspect, are lots of people. But if I go to the bank once a week and draw out a certain amount of cash, it makes the budgeting automatic. Easy.

4. Less worry about identity theft. Do you worry about handing out your card or details every time you make a purchase? I do. The banks and online merchants work hard to maintain security, but the crooks are just as inventive. And there are plenty of them. People suffer identity theft all the time. Using cash cuts down on the risk.

5. Fewer impulse purchases. One way credit cards let us spend more is that they make it easier to buy things that we don't need, and may not even want, on the spur of the moment. And the stores are set up to encourage it they rely on sophisticated marketing science to manipulate you into reaching into your wallet. If you don't have the money on you, you can't splurge. If you really want the item in question, you can come back and buy it tomorrow. Chances are you won't.

6. I can still shop online. Just because I'm using cash doesn't bar me completely from getting online deals. Yes, I'll have to bend a principle, but I won't have to break it: I can buy a prepaid card in a store and charge it up with cash. Okay, so it's plastic, but I have to pay for it in advance, with cash, and it will have a limit. (On the same principle, I can also use a prepaid card as an emergency backup if I travel).

7. Say goodbye to debt. I pay my cards off in full every month, but a lot of people don't. They use their cards to borrow, and it's a financial disaster. We've seen what the overuse of debt has done to our economy. According to Bankrate.com, the average card charges you 14% interest. Many charge a lot more. And you're paying with after-tax dollars. As an illustration, you'd have to earn at least 16.5% on the stock market (before long-term capital gains tax of 15%) just to keep up. Good luck with that. Says New York University's Stern School of Business, since 1928, U.S. stocks have produced an average compound return of just 9.7%. And Bankrate calculates that someone who buys a $1,000 item on a credit card charging 14% interest, and merely pays 2% of the balance each month, will end up paying $1,750 for that item. It will take 110 months to pay off the bill.

8. Privacy. Credit cards are great for tracking people. They tell you exactly what you bought, where and when. (Throw in all the data tracked by your smartphone, your iPad and so on, and we're basically rats scurrying around in a Perspex cage while marketing strategists study our every move). I have to confess I hate it. And I love the privacy and anonymity of cash. Last week I meet my wife for lunch. But I stopped by my bank first to take out cash. It's none of American Express' business.

9. Cash rebuilds the link between what I earn and what I spend. I remember back when I got my first job: I started calculating how much everything I spent cost in terms of hours worked. That new CD cost two hours of my time, and so on. It was a good discipline. Credit cards weaken the link. It's no wonder that the rise in plastic has resulted in an explosion in the numbers living beyond their means. (Is it also a coincidence that the rise of the credit card has also coincided with the collapse in unions? Before VISA, if you wanted a fancier car or vacation next year, you needed a pay raise).

10. Cash helps people I want to help. The money goes to the merchant and his suppliers. When I go into my local credit union to cash a check, I'm keeping a couple of local tellers in work. Credit cards? I'm helping finance bank executives, marketing teams and call centers in India. I am sure they are all fine people, and I wish them well. But if I had to choose, and I do, I would rather help my local merchants and credit union staff.

Friend: Government was paying hacker $75k a year

Convicted TJX hacker Albert Gonzalez earned $75,000 a year working undercover for the U.S. Secret Service, informing on bank card thieves before he was arrested in 2008 for running his own multimillion-dollar card-hacking operation.

That information is according to one of Gonzalez's best friends and convicted accomplices, Stephen Watt.

Watt pleaded guilty last year to creating a sniffer program that Gonzalez used to siphon millions of credit and debit card numbers from the TJX corporate network while he was working undercover for the government.

Watt told Threat Level that Gonzalez was paid in cash, which is generally done to protect someone's status as a confidential informant.

The Secret Service said it would not comment on payments made to informants. Gonzalez's attorney did not respond to a call for comment.

"It's a significant amount of money to pay an informant but it's not an outrageous amount to pay if the guy was working full time and delivering good results," says former federal prosecutor Mark Rasch. "It's probably the only thing he was doing -- other than hacking into TJX and making millions of dollars."

Gonzalez's reported salary highlights how entwined he was with the government at the time he participated in the largest identity theft crimes in U.S. history.

Gonzalez, 28, is set for sentencing this week on three indictments covering nearly every headline-making bank-card theft in recent years, including intrusions at TJX, Office Max, Hannaford Brothers, 7-Eleven and Heartland Payment Systems (which alone exposed magstripe data on 130 million credit and debit cards).

Thehacker's plea agreements contemplate a total prison term of between 17 and 25 years.

Rasch says Gonzalez's $75,000 is nothing compared to the million-dollar payouts some undercover informants get for high-risk, high-value cases such as Mafia investigations. But Gonzalez's payments dwarf the meager handouts given previous computer crime informants.

Identity thief Brett Johnson, aka Gollumfun, said he earned $350 a week -- the equivalent of about $18,000 a year -- while working undercover in the Secret Service's Columbia, South Carolina, field office helping catch card thieves.

Johnson was recruited by the agency in 2005 after he was arrested buying merchandise with counterfeit cashier's checks; his public service ended 10 months later when agents discovered that, like Gonzalez, Johnson was two-timing them, running a fraudulent tax-return scheme during his off hours that was bringing him an extra $5,000 to $6,000 each week.

Another carder, David "El Mariachi" Thomas, worked undercover for 18 months for the FBI in 2003 and 2004 running a carding site called The Grifters out of a Seattle apartment. The bureau paid rent and expenses for him and his live-in girlfriend, and bought the computers he used to run the undercover operation, but didn't pay him a salary.

In the 1990s, informant Justin "Agent Steal" Petersen was reportedly paid $200 a week while helping the FBI build a case against Kevin Mitnick, then the number one hacker target on the government's radar.

For his part, Gonzalez began working for theSecret Service when he was arrested making fraudulent ATM withdrawals in New York.

Under the nickname "Cumbajohnny," he was a top administrator on a carding site called Shadowcrew. The agency cut him loose and put him to work undercover on the site, where he set up a VPN the carders could use to communicate -- a supposedly secure communications channel that was actually wiretapped by the Secret Service's New Jersey office.

That undercover operation, known as "Operation Firewall," led to the arrest of 28 members of the site in October 2004. After the site went down, Gonzalez changed his nickname to "Segvec" and moved to Miami where he resumed his life of crime under the noses of the agents who were paying him.

Authorities finally arrested him in May 2008. After many months, he directed them to a stash of more than $1 million in cash buried in a barrel in the backyard of his parents' home.

Rasch says a number of factors determine what an informant is paid, such as whether they have specialized technical skills or have infiltrated an underground organization; whether they're putting themselves or family members at risk; and whether the investigations they work involve stolen funds that the government has a good chance of recovering.

"If I'm working on a case involving $20 million in fraud and the government is likely to get some of that money back, $75,000 is chump change," Rasch says. "They don't use paid informants that often.... Criminals will ordinarily cooperate [without payment] in return for a non-prosecution" or sentence reduction.

The Department of Justice publishes nonbinding guidelines that discuss the necessity of monitoring informants and assessing a criminal's suitability to be one, but they don't provide standards for doing so.

Per the attorney general's guidelines, two law enforcement representatives are required to witness any payment made to a confidential informant and document the payment in the case files, indicating if it's for information, services or expenses. The informant must also sign or initial a written receipt.

At the time of the payment, the law enforcement agents are required to advise the confidential informant that the payment may be taxable income that must be reported to the IRS and state agencies.

The Secret Service's embrace of Gonzalez as a professional informant may have reinforced his criminal behavior. Gonzalez felt he'd been rewarded for his preoccupation with computers, according to a letter written by his sister to one of his sentencing judges.

"All this seemed okay at the time, but psychologically it was feeding an obsession that in the end would become my brother's downfall," Frances Gonzalez Lago told the court in December.

Gonzalez is set for sentencing Thursday in U.S. District Court in Boston for the TJX, Office Max, and Dave & Buster's breaches. He appears in front of a different judge the next day for sentencing on the Heartland, Hannaford and 7-Eleven thefts. The government is seeking a sentence of 25 years in prison.